Opportunities
Residential Home Cleaning Services with over 1000 Active Clients
27% profit margins - owner does no labor!
Specifications
With over 1,000 clients, primarily homeowners and realtors, the owner of this business does no labor! Offering handyman-type services since 2013, this company in Northeast Virginia has been considered a one-stop shop in the area for the last 7 years. Working 35% in residential cleaning, 30% handyman, 25% painting solutions, and 10% miscellaneous, this business offers an extensive variety of services. Selling at a 3 multiple and with a 27% profit margin, there has been consistent year over year growth in revenue and profit. There are over 1,000 active clients in the company’s system, and they are generally adding at least one new customer each day. These clients are able to book what they feel best fits their needs, with options for weekly, biweekly, twice weekly, monthly, or a one-time service. The team consist of 5 full-time employees with 1099’s used as needed; the current owner handles management, scheduling, and hiring, but does not do labor.
The business is being run from the owners’ home, so there is very low overhead in the business, allowing for over 30% profit margin year after year. The service area is generally kept within 40 miles from the home, but they do extend a bit past that if needed for a job. They work regularly with over a dozen realtors, who employ them for whatever jobs are needed at the time.
Growth opportunities include adding flooring and remodeling services and expanding the area of service. They are not actively seeking new clients either, just using social media for marketing, so being more active on sales or setting up contracts with realtors would be a great move as well. The owners have chosen to take their lives in another direction, but they have done their best to set this company up for easy takeover!
Business Highlights
- Year Established: 2013
- Location: Spotsylvania County, Virginia
- Service Area: Northeast Virginia
- Services: 35% residential cleaning, 30% handyman services, 25% painting solutions, 10% misc.
- Clients: 1,000+ - Largely homeowners & realtors
- Reason for Selling: Change in career
- Personnel: 5 FT, 1099’s used as needed
- Seller Training Period: 3-6 months
- Growth Opportunities: Adding flooring and remodeling services; expanding area of services
- Current Owners’ Responsibilities: Management, scheduling, hiring; no labor
Financial Highlights
- List Price: $1,050,000
- Gross Sales:
- 2020: 1,314,006 (Annualized)
- 2019: $1,028,723
- o 2018: $711,006
- Cash Flow:
- 2020: $361,127 Annualized
- 2019: $339,601
- Assets Included in Purchase*
- Equipment: General cleaning equipment, portable extractor (for dryer vents/air ducts)
- Intangible Assets: Consistent work with realtors; great reputation
*amounts may vary, assets may be depreciated, replacement cost, or fair market value
Cash Flow Analysis
| Description of Financial Statement | P&L Statement | Tax Return | Tax Return | Tax Return | Tax Return | Notes |
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| GROSS SALES | $1,095,005 | $1,036,101 | $711,006 | $596,132 | $433,929 | |
| Net Income Shown on Financial Statement | $248,768 | $279,698 | $169,011 | $76,928 | $51,723 | |
| ADDBACKS | ||||||
| Compensation to Owner | $43,604 | $51,532 | $101,006 | $101,701 | $56,502 | |
| Tax on Owner Salary | $4,796 | $5,669 | $11,111 | $11,187 | $6,215 | |
| Meals | $2,344 | $2,411 | $738 | $1,513 | $1,090 | |
| Depreciation | $0 | $0 | $0 | $0 | $0 | |
| Auto Expense | $1,427 | $0 | $3,500 | $0 | $0 | |
| TOTAL ADDBACKS | $52,171 | $59,612 | $116,355 | $114,401 | $63,807 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $300,939 | $339,310 | $285,366 | $191,329 | $115,530 | |
| Profit Margin | 27.48 % | 32.75 % | 40.14 % | 32.10 % | 26.62 % |
Clients
- Homeowners
- Realtors
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
Services
- Residential cleaning
- Handyman services
- Painting solutions
- Air duct/dryer vent cleaning
- Carpet cleaning
Personnel
- 5 FT
- 1099’s as needed
Growth Opportunities
- Adding flooring and remodeling services
- Expanding area of service
- Setting contracts with realtors
- Active sales
- Increase marketing efforts
Valuation Details
The Firm used a cash flow valuation methodology to determine the purchase price of the business.
The formula used is as follows:
Cash Flow x Prescribed Multiple = Fair Market Value
Cash flow is the sum of business net income plus any owner perks and any non-onward going expenses.
A prescribed multiple is determined by a 20 question, 100-point parameter ranking system that is used to analyze the current business health. Each question is based on a scale from 1 to 5: 1 being low, 2 below average, 3 average, 4 above average, 5 high. The average of the responses sum is the business’ prescribed multiplier.
For this business, the 2019 cash flow was used with a prescribed multiple of 3.1. With this information, the computation is as follows:
$339,601 x 3.1 = $1,052,763
The fair market value found above positions the business list price at $1,050,000.
Funding Example
Purchase Price: $1,050,000
12.5%Buyer Down Payment: $131,250
12.5%Seller Financing: $131,250
75%Bank Loan: $787,500
Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $2,447.
Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $8,743.
After business expenses and loan payments, a buyer with a 12.5% down payment of $131,250 would retain a profit of $205,324, which results in a 156.44% return on investment in the first year.
A lender is required to have a minimum 1.25 coverage ratio for any business loans extended. At a proposed purchase price of $1,050,000 with the terms listed above, the coverage ratio is 2.53.
Please note that the decision of whether to extend a loan on any sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available.
*The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.
Funding Details
Business:
Offer Price: $
% Buyer Cash Down at Closing: $
% Seller Carry Back via Promissory Note: $
year term at a rate of %
% of Purchase Price secured by Buyer and Seller
Total Bank Loan Need: $
% of Purchase Price
Desired Loan Type:
Desired Bank Terms: year term at a rate of %
Total Business Assets, Inventory, and A/R: $
Total Undercollateralized Loan: $
Loan Payments
| Monthly Payment to Bank: | $ |
| Yearly Payment to Bank: | $ |
| Monthly Payment to Seller: | $ |
| Yearly Payment to Seller: | $ |
| Total Monthly Debt Service: | $ |
| Total Yearly Debt Service: | $ |
Conclusions
Fixed Charge Coverage Ratio
The bank will require a minimum ratio of 1.5 to be lendable.
|
Cash Flow: 2019 Cash Flow |
$ |
| Annual Debt Service: | $ |
| RATIO: |
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
|
Cash Flow: 2019 Cash Flow |
$ |
| Annual Debt Service: | -$ |
| NOI: |
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
| Down Payment: | $ |
| NOI: | |
| ROI: | % |
Attachments
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